U.S. Bancorp (USB) - Get U.S. Bancorp Report shares were higher after the bank titan agreed to pay $8 billion of cash and stock for MUFG Union Bank, the U.S. unit of Japan’s giant Mitsubishi UFJ Financial (MUFG) - Get Mitsubishi UFJ Financial Group, Inc. Sponsored ADR Report.
The transaction will sharpen U.S. Bancorp’s focus on California, Washington and Oregon, it said.
The $8 billion includes $5.5 billion in cash and 44 million shares of U.S. Bancorp. MUFG will end up with a 2.9% stake in U.S. Bancorp.
U.S. Bancorp recently traded at $56.16, up 0.9%, and MUFG at $5.83, up 2.1%.
U.S. Bank will gain more than 1 million consumer customers and about 190,000 small-business customers on the West Coast. \
It also gets $58 billion in loans and $90 billion in deposits, based on MUFG Union Bank’s June 30 balance sheet.
The deal will move U.S. Bank up to 5th in California deposits from 10th now.
U.S. Bancorp expects the transaction to be about 6% accretive to earnings per share in 2023 and 8% accretive to earnings when fully integrated.
The purchase price is estimated at 1.3 times of MUFG Union Bank’s tangible book value, based on the expected capital to be delivered at closing.
The transaction has been approved by the boards of U.S. Bancorp and MUFG. It's expected to close in the first half of 2022, subject to conditions including regulatory clearances.
MUFG Union Bank yesterday entered a consent order with the U.S. Office of the Comptroller of the Currency over charges that it didn’t comply with federal information-technology security rules.
U.S. Bancorp said it "evaluated and incorporated these regulatory concerns into all aspects of the deal process, including due diligence, integration planning and valuation.
"The company believes it can successfully remediate the issues applicable to MUFG Union Bank in connection with the transaction, and that the order will not restrict U.S. Bancorp's ability to operate and grow its business as planned."